How I Founded a $2 Billion Company with a 95 Cent Book from RadioShack

How I Founded a $2 Billion Company with a 95 Cent Book from RadioShack

Polycom’s co-founder on the best investment he ever made, and why thinking small is a big idea

Credit: Polycom

“Every minor detail is a major decision. Have to keep things in scale, have to hold to your vision.” — “Bit by Bit,” Stephen Sondheim

It was March of 1991 and Polycom co-founder Brian Hinman and I were on yet another urgent trip to buy components.

Brian and I had known each other for years. We first worked together in 1984 starting PictureTel, a pioneer in creating the hyper-efficient video compression techniques that are still a driving force of the Internet. When, a few years later, we decided to form Polycom, it was to build things that let people communicate not only with video, but however they wanted.

The Polycom process (circa 1991)

As startups do, we had a lot of ideas. Better video communications, text, “content” and graphic communication were some of the concepts, but we decided to start with audio. Shortly after building Polycom’s first working breadboard, a 5 GHz wireless microphone system, it became clear that we needed something with a wider appeal and decided that an open-air audio system, something like a super-speakerphone, would be just the ticket.

We knew that creating a compact, powerful, yet distortion-free loudspeaker would be essential for the top performance we needed. But we also knew that designing that speaker was going to be an enormous challenge, because it needed to deliver exceptional sound from a very cramped space in a way that had not been done before.

And there we were, standing in that inspirational stomping ground called RadioShack at the very time we needed a breakthrough in our loudspeaker strategy. And I spotted a little book on the shelf.

Yes, I know that RadioShack today is not often considered an “inspirational stomping ground,” but from the late 1970s into the early 1990s it was one of Silicon Valley’s creative epicenters.

Why? Because it supported the soul of Silicon Valley, the generations of tinkerers and builders who started small. And big things come from small packages. Yes, that’s a cliche, but it’s a good one. Especially for founders who are looking to create large opportunities from small resources. Startups aren’t normally lathered in cash at the outset (Polycom certainly wasn’t), but can be distracted by an unrelenting swirl of other people’s big things — like multi-million dollar investment announcements and billion dollar acquisitions. In that atmosphere it’s easy to lose sight of why small things matter and the difference they make in business and in life.

RadioShack-type people loved making things work, taking things apart and (sometimes) putting them together again. Brian and I were RadioShack people. Some RadioShack people go on to pursue other interests, some became professors, and some (Woz from Apple springs to mind, as does Pixar co-founder Alvy Ray Smith and James Dyson of vacuum fame) transformed creative genius into commercial success.

Here’s an example of a small thing, a seemingly irrelevant step on the path to Apple: Steve Wozniak and Steve Jobs built their own “blue box”: a home-made electronic device that generated a special tone that tricked the phone system into believing the blue box was a telephone operator (on one occasion the two friends used it to prank call the Vatican and impersonate Henry Kissinger).

But they did it differently than the conventional analog transistor tone generators that were used for this purpose by the “phone phreaks” of the time. At the heart of the Jobs and Wozniak blue box was the TRS-80, “one of the first affordable personal computers and one of the first computer devices RadioShack ever produced.” And as Wired reported last year on that sad day when RadioShack filed for bankruptcy:

“Without RadioShack, there’s no Blue Box. And as Woz tells it, without the Blue Box there’s no Apple.”

It was festive, almost inspiring, to be inside a RadioShack store (at least for nerds), so when I spotted that little red book with the unglamorous title Building Speaker Enclosures, I figured 95 cents was a good gamble.

Our knowledge of speakers was only what we had casually picked up in hi-fi stores and by playing with radios. For one thing, we thought that speakers had to be big to get good fidelity and low distortion. But in the little speakerphone case we were planning, we had no room for big. We needed a high-performance speaker that was compact, but at the same time easily isolated from the microphones that would be only inches away within the speakerphone enclosure.

And this was where that 95 cent book came in. It explained the concept of “acoustic suspension,” and we realized that this approach was exactly what would solve the problems of our new creation.

Acoustic suspension gave us the secret of a sealed speaker enclosure. In turn, that sealed enclosure created two separate acoustic environments within a small space — one inside the speaker enclosure, where the cone-shaped speaker element was, and one outside, where the microphones were. This isolation was a breakthrough in the product’s performance. And we got it all from that book.

Working from those insights, we built our first physical model in a single weekend using plastic panels from the hobby shop, hot glue, and an off-the-shelf paper-cone speaker.

Like the team that joined us one by one (even a team is built from small things), Brian and I devoted every free moment we had to bringing this first small thing to life. In the early days, our lives revolved around sketches, phone calls, soldering irons and software tools.

Yes, software tools. Because another key to flawless operation was the mesh of algorithms that cancelled echoes and prevented feedback, allowing both sides of a phone call to talk at the same time when nested inside that intricate acoustical design.

A new idea rarely comes with cash in its pockets, so we’d breadboard each new iteration by scavenging the debris from older versions. If it was quiet enough, we could approximate an audio test; if not, there was always 2 a.m. when the rest of the world was asleep.

For the design itself, we recruited a gifted industrial design firm with whom we had worked at PictureTel, James Bleck Associates. Given a set of specific physical requirements, they came up with over a dozen concept sketches (I still have those workups), and we worked with them to evolve one of those sketches into what became the iconic SoundStation. It was only another small thing, that sketch, but it was so powerful it became the symbol of the company for a while.

Early concept sketches for the original Polycom SoundStation. Credit: Polycom

You can ignore a lot of these details; the takeaway is that every answer and development revolved around starting smaller, not bigger.

As Steve Jobs famously claimed:

“It takes a lot of hard work to make something simple, to truly understand the underlying challenges and come up with elegant solutions.”

In 1992, Polycom finally unveiled its first product to the world: the SoundStation audioconference system, blending ideas from that 95 cent book, the talents of many people, and a lot of trial and error.

The original Polycom SoundStation from 1992.

By the close of that year, we’d earned our first $1.4 million in revenue and grown our company from two to 50 employees.

In the years following, we continued developing things that let people collaborate in all the ways they wanted: next was graphics and content, and then video, and then a network that was smart about video. Each one was built in small steps, either directly or, in a few cases, by joining forces with another company (ViaVideo, the historic innovator PictureTel, and a few others) that had gone through those small steps themselves and brought that fruit to the table.

By 1998, we reached $100 million in revenue. Two years later, we hit $100 million in a single quarter. Then, in 2008, we crossed the $1 billion mark.

Today, more than five million people in more than 400,000 companies and institutions worldwide defy distance with secure video, voice and content with Polycom.

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